China’s JDB and COFCO set aside dispute to seal major can deal for the year

15-Jan-2019 - Last updated on 15-Jan-2019 at 01:33 GMT

JDB and COFCO Packaging officials at the signing of the new packaging supply agreement.

Related tags JDB COFCO Packaging Wang Lo Kat

Chinese herbal tea manufacturer Jia Duo Bao (JDB) and COFCO has signed a major packaging deal this year, which will see the latter producing 70% of metal cans that JDB needed.

The two have been long time partners, cooperating for nearly 10 years. However, relations soured last year when COFCO Packaging accused JDB’s subsidiary Wong Lo Kat (Wang Lao Ji) of violating capital increase agreement, and brought the matter to arbitration.

The new deal, signed in Beijing, seems to signal improvements in ties.

“In the start of the new year, the COFCO Packaging team visited JDB’s new team. Both parties had an honest and friendly interaction,” JDB said in its media announcement.

“The deal marks the further holistic strategic cooperation between the two parties in the new year.”

COFCO – the most important supplier

According to partnership terms, both have reached consensus in terms of the number of can production, pricing, payment methods, and packaging innovation.

“As partners for years, in year 2019, the metal cans produced by COFCO packaging will be 70% of what JDB needed for the entire year.

“This means that JDB and COFCO Packaging have further deepened cooperation ties, COFCO Packaging will continue to be the most important packaging supplier of JDB.”

Resolution

Both party said they would engage in active discussion to resolve the disagreements and contentious points regarding Qingyuan JDB Herbal.

The disagreement broke out in July last year, when COFCO Packaging claimed that JDB’s subsidiary firm Wong Lo Kat did not adhere to a capital increase agreement signed in 2017.

The agreement required the Wong Lo Kat to inject the JDB trademarks to Qingyuan JDB Herbal as its asset capital contribution.

However, COFCO Packaging claimed that Wong Lo Kat did not do so, and filed an arbitration application to the Hong Kong International Arbitration Centre against Wong Lo Kat and other parties involved, including Wisdom Kingdom and Qingyuan JDB Herbal.

JDB’s CEO Li Chunlin previously revealed that COFCO Packaging had stopped its supply of metal cans to JDB despite being the supplier since the second quarter of 2018.

As a result, JDB’s production was affected in June to October, which in turn impacted distributor’s confidence in ordering the JDB’s products.

“Cutting the supply is fatal to us,” Li told the media back then.